Japanese Yen gains against USD following BoJ's hawkish hold; attention turns to Ueda's press conference

• Selling pressure persists in USD/JPY for a second consecutive day as several adverse factors weigh on the pair.
• The JPY gains support as a strong Tokyo CPI reading and the BoJ’s hawkish stance reinforce expectations of a December rate hike.
• The USD and spot prices face pressure as US bond yields decline and hopes rise for diplomacy with Iran.

USD/JPY extends its decline for a third consecutive day on Friday, moving further below the mid-157.00s in Asian trading after the closely watched Bank of Japan (BoJ) policy announcement.

A modest gain in the Japanese Yen (JPY) is weighing on USD/JPY as expectations of an imminent December rate hike gain further support. The BoJ left its policy rate at 1.25%, as expected, following an 8-1 vote in which Takata dissented in favour of an increase. Its accompanying statement said core inflation was likely to remain close to levels consistent with the price target, while risks to prices remained skewed to the upside. Alongside the strong Tokyo CPI report released earlier today, the statement reinforces market expectations of a December hike.

Selling in the US Dollar (USD) continues unabated as hopes persist for a diplomatic settlement to end the US-Iran war. Falling US bond yields are also reducing the US-Japan interest rate differential, providing further support to the lower-yielding JPY and adding to pressure on the Greenback. Although these factors support the case for further losses in USD/JPY, bearish traders are holding off on fresh positions until BoJ Governor Kazuo Ueda speaks at the post-meeting press conference.